POLICY IMPLICATIONS OF PRICE DYNAMICS AND THE WAY FORWARD - Food Security, Food Prices and Climate Variability - page 187

neighbors without going to a market. Thus local goods that are neither recorded nor taxed
are very hard to track.
Plate 23 shows a communal field of the local grain, teff, in Adi Ha, Tigray region, Ethi-
opia. The field, large and irregular, contrasts nicely with the irrigated orchard and vegetable
fields that stand out as being far greener than the hay-colored teff field. Identifying this region
as a field and relating the variability of teff production to growing conditions is the challenge
of creating a suitable index for insurance contracts. Productivity comparisons of modeled
versus observed production must be done on an annual basis, thus many years of observations
are needed.
Figure 9.1 shows the flow of information in an index insurance project, and the various
inputs needed to develop and implement an insurance contract. Information about the prob-
ability of a drought is incorporated into the contract design, as well as used as an input into
the trigger value written into the agreement. Moving away from the necessity of having
households be near to a meteorological station will greatly increase the number of households
that can participate in index insurance programs. Improved assessment of the relationship
between temperature, precipitation, vegetation and actual production will reduce the risk in
writing the contracts as well, helping to drive down the cost of the program in the long
term.
Improved crop varieties and fertilizer to improve production in good years
In order to take advantage of improved models that estimate future growing conditions,
farmers need to have improved varieties of the crops they are used to growing and that have
a local market for the product after harvest. Agricultural development programs are working
to provide new crop varieties and hybrid varieties that can have much higher yields in years
with good growing conditions. There are three kinds of varieties of seeds:
• Openpollinatedcropvarietieswithwidespreadusethatpollinateandreproducenatur-
ally (either through self- or cross-pollination), and whose seed can be saved, unlike to
hybrid seed.
• Localvarietiesthathavebeendevelopedbyfarmersandaregrownbyfarmerswithout
any formal plant breeding
• Hybridseedsthatareproducedbycrossingtwoormoreseparatein-bredlines.Hybrid
varieties typically produce high yields the first year, but the yield drops if recycled for a
second year. These are commercially available, high yielding seeds that have new vari-
eties introduced every year by companies such as Monsanto and Bayer.
Plant breeding has increased the harvestable portion of cereal crops from 30 percent in the
1960s to about 50 percent for modern hybrid crops (Bindraban and Rabbinge, 2012). These
improvements make up approximately half of the total increase in yields. USAID is funding
new hybrid varieties for commonly grown tropical crops such as okra, maize, soybean,
cowpea, tomato, upland rice, sorghum, millet, eggplant and peppers. Once the varieties have
been developed, then a wide variety of extension services and marketing activities must
happen for farmers in remote areas to get access to them. Demonstrations of these new seeds,
as well as ensuring that they work as well in the field as expected, require engagement of
farmers and the use of “experimental farms.” Extensive institutional support is required that